Promising to renegotiate NAFTA, the Trump administration has proposed controversial changes to the 24-year-old trade agreement that could harm Mississippi workers and families. As parties take part in the sixth round of talks in Montreal, the administration should consider the concerns voiced by auto industry leaders who say that proposed U.S. amendments to NAFTA would be costly for American automotive companies, investors and ultimately, consumers, including those in the Magnolia State.

NAFTA was originally designed to create a tariff-free zone where businesses in the U.S., Canada, and Mexico could import and export products without extra costs. Since it went into effect in 1994, NAFTA has attracted billions of dollars of domestic re-investment and new foreign direct investment to these three countries. The agreement has had a positive impact on the global automotive industry, helping to spawn a complex web of worldwide supply chains between “best-cost” countries, which in turn results in lower prices for consumers and capital returns for investors.

In 2016 alone, the NAFTA countries produced more than 17.8 million light vehicles. In the past decade, Japanese and European companies have transitioned production and assembly plant investments to North America, where they can rely on North American supply chains instead of sourcing parts from overseas. It is not coincidence that each of the world’s six major automakers (Fiat Chrysler Automobiles, Ford, GM, Honda, Nissan, and Toyota) now produce vehicles in North America.

The auto industry has been expanding in Mississippi in recent years, helping to place it on the "map of economic development," according to the CEO of the Mississippi Economic Council. Nissan was the first to open a major assembly plant in the state in 2003. Toyota Motor Corp. followed suit in 2011 with the opening of its Blue Springs facility. Together, these plants have helped contribute to a rise in employment and earnings, with more than 55,000 jobs created statewide. Moreover, the average salary offered by the industry was approximately $50,000 in 2016, 34 percent above the state average.

Significant changes to NAFTA proposed by the Trump administration, however, could set back this economic progress.

One controversial proposal involves changing the rules of origin to increase regional content requirements. For automobiles and auto parts to qualify for NAFTA benefits, 85 percent of inputs used in manufacturing would have to originate within the NAFTA countries, versus the 62.5 percent currently required. Another proposal seeks to impose a new national origin requirement that half of every car traded under NAFTA be built in the U.S. This directly contradicts the “best-cost” nature of current automotive supply chains.

The Trump administration’s desire to raise regional content requirements to 85 percent is a provision at odds with the wishes of American automakers, which rightly fear it will both drive up their costs and make them less competitive globally. NAFTA allows automakers to lower their supply chain risk and ensure that production remains in North America rather than move off shore to China or Eastern Europe, and its existing rule of origin is already the highest of any trade agreement in the world.

The Trump administration argues that the new manufacturing rules are necessary because of our significant trade deficit with Mexico. Yet Mexico is the second-largest export market for American goods, accounting for about 16 percent of U.S. exports. The U.S. auto industry has a major stake in free trade with Mexico because it relies heavily on car parts from Mexico for its factories in Detroit and other production hubs.

At the same time, the Mexican economy leans heavily on trade with the U.S., which purchases about 80 percent of all Mexican exports. The auto sector has become a growth engine for the Mexican economy and an export hub because of NAFTA. Manufacturers have been lured to the sector by cheaper labor and numerous free-trade agreements.

The largest export market for American-made goods is Canada, which accounts for about 19 percent of U.S. exports. Canada also imports more auto parts and heavy machinery than it exports to the U.S., which would presumably be a trade balance favored by Trump.

Both Canada and Mexico have so far declined to engage in serious negotiation on the U.S. proposals. Mexico’s position is that the U.S. shouldn’t place tariffs on its products, or make it easier to do so in the future, while Canada’s goal is to keep the U.S. from imposing tariffs on goods freely traded for more than two decades. If the U.S. pushes its agenda too far, either partner could retaliate by restricting U.S. imports, which would hurt U.S. auto manufacturers.

NAFTA has been integral to the car industry’s resurgence, and abandonment of the agreement would have unintended consequences, such as eliminating U.S. automotive and parts jobs to the tune of 31,000 by some estimates, increasing the price of cars, and disrupting current supply chains. Rebuilding a supply chain that has been in place for decades is a daunting process.

Further, without NAFTA, the domestic vehicle market will be overrun by the larger Chinese and EU markets. Canada recently concluded a Free Trade Agreement (FTA) with the EU, and Mexico has ongoing negotiations with the EU on an FTA. If NAFTA renegotiation is not a success, Trump has signaled he could end the trade pact with Canada and Mexico entirely, which would slap tariffs ranging from 10 percent to 35 percent on vehicles and parts made in Mexico that are imported into the U.S. Domestic vehicle prices would increase by an estimated $5,000 to $15,000 per car.

If NAFTA renegotiations fail, Mississippi’s automakers will lose. While growing U.S. manufacturing and jobs is a cause Americans support, making NAFTA’s auto rules of origin more stringent is likely to have the opposite effect.

Frances Hadfield is a counsel at Crowell & Moring in New York where her practice focuses on customs litigation and regulatory compliance.